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O’Melveny Legal Malpractice Drama Heads Back to Court

Oct. 21, 2019, 8:50 AM

A federal judge in Los Angeles will hear arguments Oct. 21 about whether she should set aside an arbitration award finding that O’Melveny & Myers didn’t commit legal malpractice during its representation of a now-defunct investment boutique.

U.S. District Judge Christina Snyder is presiding over a long-running case that pits Aletheia Research and Management’s Chapter 7 estate trustee, Jeffrey I. Golden, against the BigLaw firm.

Arbitration awards aren’t overturned lightly, and a finding in favor of Aletheia could leave O’Melveny on the hook for millions in alleged losses and damages.

But Golden likely will face an uphill battle to convince Snyder that arbitrator Gary Feess “disregarded” the law in June when he found that O’Melveny’s joint representation of Aletheia and its founders didn’t violate conflict of interest rules.

O’Melveny defended Aletheia and its founders, Peter Eichler and Roger Peikin, from 2009-12 in a suit brought by Proctor Investment Managers.

A few years earlier, Proctor had paid $16 million for a 10% interest in Aletheia and quarterly shareholder distributions. But the relationship soured, with both sides alleging the other breached the agreement.

Proctor alleged that Eichler and Peikin had breached their fiduciary duties by taking excessive compensation from Aletheia and then sought to conceal their “corporate fleecing,” Golden said in the September motion to set aside the award.

In a settlement, Aletheia agreed to pay Proctor more than $21 million. In sought bankruptcy protection in 2012. The case then was converted to Chapter 7.

Golden sued O’Melveny in 2014, alleging legal malpractice and a number of bankruptcy claims. The lawsuit seeks to recover the “losses and damages” caused by the law firm.

In 2015, Snyder allowed O’Melveny’s motion to arbitrate the malpractice claim and stayed the bankruptcy claims.

Golden now argues that public policy demands vacating the Feess’s ruling because it ignores state law prohibiting attorneys from jointly representing clients with conflicting interests without informed written consent.

O’Melveny should have advised Aletheia to hire independent counsel to review “and if appropriate bring claims, without limitation, against Eichler for corporate mismanagement and waste,” Golden said.

O’Melveny argues that Golden’s allegations are baseless. Feess found no conflict in the firm’s joint representation and Golden “has not proved that anything O’Melveny did or failed to do caused damage to Aletheia,” it said.

The law firm also wants Golden’s non-arbitrable bankruptcy claims to be tossed, based on Feess’s findings.

Counsel for Golden didn’t respond to a request for comment. Counsel for O’Melveny declined to comment.

The case is Golden v. O’Melveny & Myers, C.D. Cal., No. 2:14-cv-08725, Hearing 10/21/19.

To contact the reporter on this story: Melissa Heelan Stanzione in Washington at mstanzione@bloomberglaw.com

To contact the editors responsible for this story: Jessie Kokrda Kamens at jkamens@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com; John Crawley at jcrawley@bloomberglaw.com